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IMI PLC (IMI)

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Monday 12 March, 2001

IMI PLC

Final Results

IMI PLC
12 March 2001



12 March 2001



IMI plc Preliminary Results

   IMI plc, the major international engineering group, today announced its
           preliminary results for the year ended 31 December 2000.

                                                               2000     1999
Sales                                                        £1615m   £1502m
Results before goodwill amortisation and exceptional items:
Profit before tax                                            £148.3m  £145.0m
Adjusted earnings per share                                    28.6p    28.0p
Results after goodwill amortisation and exceptional items:
                                                             
    Profit before tax                                        £143.6m  £123.1m

                                                               
    Earnings per share                                         27.1p    22.6p

Dividend per share                                             15.5p    15.1p


              * Increased sales, profit and earnings per share
              * Strategy review making good progress




In his Chairman's Statement, Sir Eric Pountain comments



Results and dividend for 2000

In a year when our businesses were faced with a difficult trading environment,
it is pleasing to be able to report increased sales, profit and earnings per
share.

Sales at £1,615m (1999: £1,502m) were up 7.5% and profit before goodwill
amortisation and exceptional items at £148.3m (1999: £145.0m) was up 2.3%.
Acquisitions contributed £136m sales and £2.2m profit before goodwill
amortisation. This includes £120m sales and £1.6m profit in respect of the
additional months contribution from the Polypipe businesses acquired in May
1999. The tax charge on profit before goodwill amortisation and exceptional
items was 32%, the same rate as the previous year, and adjusted earnings per
share 28.6p (1999: 28.0p), up 2.1%.

Goodwill amortisation increased to £15.2m (1999: £8.8m) largely as a result of
the inclusion of Polypipe for a full year. Exceptional items of £10.5m profit
resulted mainly from property sales and compared with a £13.1m net loss last
year arising from the sale and closure of businesses. Including these items,
profit before tax increased by 17% and earnings per share by 20%.

Net borrowings at the end of the year were £403m (1999: £388m) and balance
sheet gearing was 84% compared with 100% at 30 June 2000 and 90% at the end of
1999. Interest cover based on operating profit before goodwill amortisation
and exceptional items was 6 times (1999: 10 times). Operating cash flow was £
154m (1999: £176m) and free cash flow after financing and dividends amounted
to £33m (1999: £77m).

The Board is recommending an increased final dividend of 9.5p (1999: 9.3p)
making a total dividend for the year of 15.5p (1999: 15.1p), up 2.6%.
Excluding goodwill amortisation and exceptional items the total dividend is
covered 1.8 times (1999: 1.8 times).

During the year we spent £40m on acquiring businesses including Robimatic in
the UK for a consideration of up to £19m and Flow Design in the US for a
consideration of £14m. Since the year end we have completed the acquisition of
BTG based in Sweden for a consideration of £16m.

The closures of copper smelting and the Drinks Dispense operation in Brazil
are largely complete and within budget; in December we sold our Australian
copper fittings business for £9m.

As previously announced, I will be retiring from the Board at the forthcoming
Annual General Meeting. I have been proud to serve as Chairman of IMI since
1989 but I feel it is now time to step down. I am delighted that Gary Allen
will succeed me as Chairman after fifteen years as Chief Executive. During
this period IMI has been developed from a predominantly UK metals business to
a global engineered products company focused on market requirements. Martin
Lamb, our new Chief Executive, will take IMI through its next stage of
development.



The Chief Executive, Martin Lamb, comments


As Chief Executive of IMI my aim is to develop those businesses which offer
the strongest prospects for growth. This will involve changes to the present
composition of the Group and in the short term, some major operational
restructuring. I am committed to realising our full potential in driving
shareholder value.

We are currently engaged in a detailed review of our businesses and future
plans for the Group. This strategy review is making good progress. We have
established clear criteria by which to judge our businesses and their
potential for profitable growth both organic and by acquisition. We have a
number of businesses which in our view already fit these criteria well. Some
have great potential but will require significant restructuring. Some will not
meet the requirements.

Whilst the review is not yet complete, it is already clear we will incur
restructuring costs of around £40m this year. The anticipated payback for the
majority of programmes is two years. Up to half of the benefits arising will
be reinvested on a continuing basis in product and market development designed
to accelerate long term growth.

I would like to express my thanks for the significant contribution of our
Chairman, Sir Eric Pountain, who will step down at the Annual General Meeting
in May, and of Gary Allen who replaces him as Non-executive Chairman. I look
forward to continuing my relationship with Gary in his new role. I inherit an
excellent base from which to take IMI forward.



Year 2000 results

For the year 2000 we are able to report sales and profit ahead of the previous
year although the second half profit was lower. In the interim results we
referred to our businesses having to cope with a number of sector specific
challenges. In Hydronic Controls, operating profit from the Polypipe
businesses was £7m lower than the full year 1999 largely as a result of the
sharp rise in raw material costs; Drinks Dispense continued to suffer from a
depressed beverage market although cost reductions improved profit in the
second half; in Fluid Power the improvement in Europe was partially offset by
the slowdown in the US automotive sector, particularly in the second half;
Energy Controls responded well to increased demand throughout the year. A more
detailed review of our four business areas for the year 2000 is given later.



Outlook

Current trading continues to be challenging. A deteriorating position in the
US, which represents 25% of our sales, is being offset by continued strength
in a number of our European markets. Whilst the position may change, there is
no immediate sign of the slowing US economy impacting prospects elsewhere.

The following is an overview of our four business areas where comparisons with
the previous year's turnover and profit relate to continuing operations.



HYDRONIC CONTROLS

Sales and operating profit before goodwill amortisation were £667m (1999: £
528m) and £81.4m (1999: £75.5m), including acquisitions during the year and a
full year's contribution from Polypipe acquired in May 1999.

Overall market demand was generally stronger during the year except in Germany
where, contrary to industry expectations, construction activity declined. In
the UK, the second half was affected by poor weather.

Raw material costs, notably copper and polymers, rose considerably during the
year and only showed signs of abating towards the end of the year. These
increases could not be fully recovered in selling prices resulting in margin
reductions in some areas. Polypipe was significantly affected with profits
well down on the excellent results of the full year for 1999. Copper tube and
fittings maintained profit due to further cost reductions and the success of
new products. In August we acquired Robimatic, the UK leader in the packaging
and distribution of plumbing products channelled into the DIY and merchant
sectors.

Heimeier and TA, our indoor climate businesses, continued to maintain their
excellent profit performance and we again added to our balancing valve
commissioning and servicing capabilities in Europe. In August we acquired Flow
Design Inc of Dallas which provides us with greater access to the large US
market and adds automatic balancing valve technology to our range of products
and services.

Our eastern European activities selling the Hydronic Controls' products
continued to show good growth.



DRINKS DISPENSE

Sales and operating profit before goodwill amortisation were £340m (1999: £
353m) and £33.0m (1999: £34.6m).

The declining sales trend of last year continued with reductions in spend from
our major soft drinks customers, a slowdown in the quick service restaurant
sector following two years of heavy expenditure, and uncertainty in the
brewing industry. This decline flattened out in the second half, and margins
improved considerably as a result of a cost reduction programme implemented in
the early part of the year.

Our major soft drinks customers have needed to re-evaluate their long-term
product strategies, with mounting evidence of fundamental shifts in consumer
taste leading to a slowdown in carbonated beverages, for so many years the
mainstay of volume growth. Health drinks, mineral waters, fruit-based products
and iced tea/coffee products are fast becoming the standard bearers for
growth, with local brands geared to local cultural needs increasingly being an
important factor.

We are well positioned for this shift in emphasis with an innovative design
capability well suited to the new product demands and a global infrastructure
geared to providing our customers with specialist local support. This
extension of our product portfolio has attracted a number of significant new
customers.

Cannon again delivered a strong performance, continuing its long track record
of profitable growth. The point of purchase equipment business was
particularly strong with many of the world's leading consumer goods companies
increasingly alert to the benefits of creative display solutions.



FLUID POWER

Sales and operating profit before goodwill amortisation were £444m (1999: £
435m) and £43.1m (1999: £38.1m).

Although UK demand was flat, in mainland Europe overall trading conditions
were strong throughout the year with export led growth in our major markets.
In particular, we made good progress in the commercial vehicle and packaging
sectors and we continued to grow in the European automotive market where we
gained significant new car programme orders.

Demand in the US was mixed. The general industrial market remained strong
until towards the end of the year; commercial vehicles and automotive suffered
from declining activity which became even more pronounced in the fourth
quarter and further cost reduction measures have been implemented.

We accelerated our investment in design centres and customer support teams,
providing tailored solutions for leading original equipment manufacturing
customers in key industrial markets. We are experiencing good growth from
these initiatives and expect to build further on this success.

The year saw a significant increase in our e-commerce investment with internet
trading set up in the US, UK and some parts of mainland Europe. This will be
further extended in 2001 and is complemented by our 24 hour on-line service
which provides technical support and advice for customers around the world.



ENERGY CONTROLS

Sales and operating profit before goodwill amortisation were £152m (1999: £
139m) and £17.6m (1999: £15.4m).

We continued to grow our severe service valve business. Strong market growth
in power generation and the recovery of the oil and gas industries brought
increasing demand for the advanced technology solutions we are able to offer.
The power generation market is growing at a fast pace and the power shortages
that are affecting regions of the United States continue to prompt high demand
for the construction of new power plants and the upgrading of existing plants
to obtain improved performance. Demand is similarly expected to remain high in
the expanding Asian and European markets. The acquisition of BTG in February
2001 will further enhance our position in these markets, particularly in
northern and eastern Europe.

There was a significant increase in demand in the oil and gas market. Liquid
natural gas plants, where we enjoy a strong market position, are growing as
the major source of gas around the world. Investment in our global sales
network continued and we have been particularly pleased with the resulting
successes in winning business in Asia.




                        GROUP PROFIT AND LOSS ACCOUNT

                     for the year ended 31 December 2000

________________________________________________________________________________
                                          Before
                                     exceptional
                                         items &
                                        goodwill     Goodwill Exceptional
                                    amortisation amortisation      items Total
                                            2000         2000       2000  2000
                              Notes           £m           £m         £m    £m
                                                                                
                                ________________________________________________
Turnover                        1
Continuing operations                     1587.3                         1587.3
Acquisitions                                15.9                           15.9
                                                                                
                                ________________________________________________
Total continuing operations               1603.2                         1603.2
Discontinued operations                     12.3                           12.3
                                                                                
                               _________________________________________________
Total turnover                            1615.5                         1615.5
                                                                                
                               _________________________________________________
Operating profit                1
                                                                                
                               _________________________________________________
Continuing operations                      173.4       (14.6)            158.8
Acquisitions                                 1.7        (0.6)              1.1
                                                                                
                                                                                
                               _________________________________________________
Total continuing operations                175.1       (15.2)            159.9
Discontinued operations                      1.2                           1.2
                                                                                
                               _________________________________________________
Operating profit                           176.3       (15.2)            161.1
Profit on disposal of           2                                    0.5   0.5
discontinued operations
Profit on disposal of                                               10.0  10.0
property
Provision for losses on         2
closure of businesses
                                                                                
                             ___________________________________________________
Profit before interest                     176.3       (15.2)       10.5 171.6
Net interest payable                       (28.0)                        (28.0)
                                                                                
                             ___________________________________________________
Profit on ordinary activities              148.3       (15.2)       10.5 143.6
before taxation
Tax on profit                   3          (47.4)                   (0.9)(48.3)
                                                                                
                             ___________________________________________________
Profit on ordinary activities              100.9       (15.2)         9.6  95.3
after taxation
Equity minority interests                   (0.3)                          (0.3)
                                                                                
                             ___________________________________________________
Profit for the financial year              100.6       (15.2)         9.6  95.0
                                                                                
                             ___________________________________________________
Dividends paid and proposed     4                                         (54.5)
                                                                          ______
Transfer to reserves                                                       40.5
                                                                          ______
Earnings per share              5                                          27.1p
Diluted earnings per share      5                                          27.0p
Adjusted earnings per share     5                                          28.6p






________________________________________________________________________________
                                          Before
                                     exceptional
                                         items &
                                        goodwill     Goodwill Exceptional
                                    amortisation amortisation       items Total
                                            1999         1999        1999  1999
                              Notes           £m           £m          £m    £m
                               ________________________________________________
Turnover                        1
Continuing operations                     1454.6                        1454.6
Acquisitions                                   -                             -
                               ________________________________________________
Total continuing operations               1454.6                         1454.6
Discontinued operations                     47.2                           47.2
                               ________________________________________________
Total turnover                            1501.8                         1501.8
                               ________________________________________________
Operating profit                1
                                       ________________________________________
Continuing operations                      163.6        (8.8)            154.8
Acquisitions                                   -            -                -
                                      _________________________________________
Total continuing operations                163.6        (8.8)            154.8
Discontinued operations                     (2.8)                         (2.8)
                                      _________________________________________
Operating profit                           160.8        (8.8)            152.0
Profit on disposal of           2                                    6.0   6.0
discontinued operations
Profit on disposal of
property
Provision for losses on         2                                   (19.1)(19.1)
closure of businesses
                               ________________________________________________
Profit before interest                     160.8        (8.8)      (13.1) 138.9
Net interest payable                       (15.8)                         (15.8)
                               ________________________________________________
Profit on ordinary activities              145.0        (8.8)      (13.1) 123.1
before taxation
Tax on profit                   3          (46.5)                     3.2 (43.3)
                               ________________________________________________
Profit on ordinary activities               98.5        (8.8)        (9.9) 79.8
after taxation
Equity minority interests                   (0.5)                          (0.5)
                               ________________________________________________
Profit for the financial year               98.0        (8.8)        (9.9) 79.3
                               ________________________________________________
Dividends paid and proposed     4                                         (53.0)
                                                                          _____
Transfer to reserves                                                       26.3
                                                                          _____
Earnings per share              5                                         22.6p
Diluted earnings per share      5                                         22.6p
Adjusted earnings per share     5                                         28.0p






                             GROUP BALANCE SHEET

                             at 31 December 2000

_______________________________________________________________________________
                                                            2000           1999
                                                              £m             £m
                                                        _______________________
Fixed assets
Intangible assets                                          286.4          246.0
Tangible assets                                            386.9          392.2
                                                        _______________________
                                                           673.3          638.2
                                                       ________________________
Current assets
Stocks                                                     325.4          289.1
Debtors                                                    332.7          301.1
Investments                                                  4.4            3.8
Cash and deposits                                           50.4           46.4
                                                        _______________________
                                                           712.9          640.4
Creditors:
amounts falling due within one year
Borrowings and finance leases                             (100.0)        (101.3)
Other creditors                                           (335.5)        (314.5)
                                                        _______________________
Net current assets                                         277.4          224.6
                                                        _______________________

Total assets less current liabilities                      950.7          862.8

Creditors:
amounts falling due after more than one year
Borrowings and finance leases                             (353.4)        (333.1)
Other creditors                                            (37.6)         (31.0)
Provisions for liabilities and charges                     (81.7)         (69.6)
                                                        _______________________
Net Assets                                                 478.0          429.1
                                                        _______________________

Capital and reserves
Called up share capital                                     87.9           87.7
Share premium account                                      132.1          130.8
Revaluation reserve                                          1.0            1.0
Other reserves                                               1.6            1.6
Profit and loss account                                    255.4          208.0
                                                        _______________________
Equity shareholders' funds                                 478.0          429.1
                                                        _______________________





                          GROUP CASH FLOW STATEMENT

                     for the year ended 31 December 2000

________________________________________________________________________________
                                                           2000          1999
                                                      £m     £m     £m     £m
                                                                                
                                            ____________________________________
Reconciliation of operating profit to net
cash
Inflow from operating activities
      Operating profit                                    161.1         152.0
      Depreciation & goodwill amortisation                 84.4          78.7
      Stocks (increase)/decrease                          (21.2)          3.6
      Debtors (increase)/decrease                         (13.3)          0.7
      Creditors and provisions decrease                   (10.4)        (13.8)
                                                         _______        _______
      Net cash inflow from operating                      200.6         221.2
      activities
                                                         _______        _______

GROUP CASH FLOW STATEMENT

Net cash inflow from operating activities                 200.6         221.2
Return on investments and servicing of                    (28.5)        (16.2)
finance
Taxation                                                  (38.3)        (30.9)
Capital expenditure and financial                         (47.4)        (45.2)
investment
Acquisitions and disposals                                (23.4)       (268.2)
Equity dividends paid                                     (53.8)        (52.2)
                                                         _______        _______
Cash flow before use of liquid resources &                  9.2        (191.5)
financing
Management of liquid resources                             (5.4)          8.2
Financing
      Issue of ordinary shares                       1.5           1.8
      (Decrease)/increase in borrowings            (19.4)        205.8
                                                  _______        _______
                                                          (17.9)        207.6
                                                         _______        _______
(Decrease)/increase in cash in the year                   (14.1)         24.3
                                                         _______        _______

Reconciliation of net cash to movement in
net borrowings

(Decrease)/increase in cash in the year            (14.1)         24.3
      Cash outflow/(inflow) from borrowings         19.4        (205.8)
      Cash outflow/(inflow) from movement            5.4          (8.2)
      in liquid resources
                                                  _______        _______
      Change in borrowings resulting from                  10.7        (189.7)
      cash flows
      Borrowings assumed with acquisitions                 (5.5)        (53.6)
      Loan notes issued as part of                         (9.7)        (63.0)
      acquisition
      Currency translation differences                    (10.5)          4.1
                                                         _______        _______
      Movement in net borrowings in the                   (15.0)       (302.2)
      year
      Net borrowings at 1 January                         (388.0)       (85.8)
                                                         _______        _______
      Net borrowings at 31 December                       (403.0)      (388.0)
                                                         _______        _______




           RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' FUNDS

                     for the year ended 31 December 2000

________________________________________________________________________________
                                                                2000      1999
                                                                  £m        £m
                                                                                
                                                          ______________________
Profit for the financial year                                   95.0      79.3
Dividends                                                      (54.5)    (53.0)
                                                                                
                                                          ______________________
                                                                40.5      26.3
Other recognised gains and losses relating to the                6.6      (8.4)
financial year
Contribution to the Quest                                       (0.1)     (0.1)
New ordinary share capital issued                                1.5       1.8
Previously acquired goodwill taken through the profit and
loss
account in arriving at the profit for the financial year         0.4         -
                                                                                
                                                         ______________________
Net increase in shareholders' funds for the year                48.9      19.6
Shareholders' funds at 1 January                               429.1     409.5
                                                                                
                                                         ______________________
Shareholders' funds at 31 December                             478.0     429.1

________________________________________________________________________________





                  NOTES RELATING TO THE FINANCIAL STATEMENTS



1.     Segmental analysis

______________________________________________________________________________

                                                              Operating profit
                                                               before goodwill
                                        Turnover                amortisation
                                        2000       1999           2000     1999
                                          £m         £m             £m       £m
                                      _________________         _______________
BY ACTIVITY
Hydronic Controls
Continuing operations                    651        528           79.7     75.5
Acquisitions                              16          -            1.7        -
                                      _________________         _______________
Hydronic Controls total                  667        528           81.4     75.5
                                      _________________         _______________
Drinks Dispense                          340        353           33.0     34.6
                                      _________________         _______________
Fluid Power                              444        435           43.1     38.1
                                      _________________         _______________
Energy Controls                          152        139           17.6     15.4
                                      _________________         _______________
Total continuing operations             1603       1455          175.1    163.6

________________________________________________________________________________


BY GEOGRAPHICAL ORIGIN
UK                                        562        445          67.8    56.5
Rest of Europe                            540        531          60.9    55.0
The Americas                              453        435          44.0    50.2
Asia/Pacific                               48         44           2.4     1.9
                                       _________________       _______________
Total continuing operations              1603       1455         175.1   163.6

_______________________________________________________________________________



TURNOVER BY GEOGRAPHICAL DESTINATION

                                                           2000            1999
                                                             £m              £m
                                                            ___________________
UK                                                          469             374
Germany                                                     204             220
Rest of Europe                                              383             353
USA                                                         397             373
Asia                                                         68              55
Rest of World                                                82              80
                                                           ____________________
Total continuing operations                                1603            1455
                                                           ____________________


                                                                  Net assets
                                                                   excluding
                                        Operating profit            goodwill

                                        2000         1999          2000    1999
                                          £m           £m            £m      £m
                                _________________               _______________
BY ACTIVITY
Hydronic Controls
Continuing operations                   66.5         68.1
Acquisitions                             1.1            -
                                        _________________       _______________
Hydronic Controls total                 67.6         68.1           301     299
Drinks Dispense                         32.6         34.3           116     108
                                        _________________       _______________
Fluid Power                             42.2         37.2           222     211
Energy Controls                         17.5         15.2            43      36
                                         ________________       _______________
Total continuing operations            159.9        154.8           682     654

________________________________________________________________________________


BY GEOGRAPHICAL ORIGIN
UK                                       54.4        49.1           290     296
Rest of Europe                           60.7        54.8           215     201
The Americas                             42.4        49.0           162     142
Asia/Pacific                              2.4         1.9            15      15
                                         ________________       _______________
Total continuing operations             159.9       154.8           682     654

________________________________________________________________________________





1.     Segmental analysis


        Acquisitions

        Robimatic and Flow Design Inc are reported within Hydronic Controls
        from their acquisitions in August 2000 and September 2000
        respectively.



        Discontinued operations

        The amounts shown for discontinued operations comprise the turnover
        and operating profit of Fittings Australia previously reported within
        Hydronic Controls and Asia/Pacific. 1999 figures also include copper
        smelting, the Drinks Dispense Brazilian operation and the Marston
        aerospace businesses.



2.     Exceptional items


        Profit on disposal of discontinued operations arises from the sale of
        Fittings Australia. The profit in 1999 represents the surplus arising
        on the sale of the Marston aerospace businesses.

        Provision for losses on closure of businesses in 1999 comprises £16.0m
        for the cessation of copper smelting and £3.1m for closing the Drinks
        Dispense Brazilian operation.



3.     Taxation


        Current UK corporation tax has been provided at the average rate for
        the year of 30% (1999: 30%). Deferred tax has been provided at the
        closing year end rate of 30% (1999: 30%). The charge for UK
        corporation tax has been reduced by double taxation relief of £4.6m
        (1999: £1.3m). A charge of £3.1m (1999: credit of £1.2m) is included
        in respect of deferred taxation.



4.     Dividend


        The Directors recommend a final dividend of 9.5p per share (1999:
        9.3p) payable on 21 May 2001 to shareholders on the register at close
        of business on 6 April 2001, which will absorb £33.4m (1999: £32.7m).
        Together with the interim dividend of 6.0p per share paid on 16
        October 2000, this makes a total distribution of 15.5p per share
        (1999: 15.1p per share).



5.      Earnings per ordinary share


        The weighted average number of shares in issue during the year was
        351.2m, 351.5m diluted for the effect of outstanding share options
        (1999: 350.5m, 350.7m diluted). Earnings per share have been
        calculated on earnings of £95.0m (1999: £79.3m) and adjusted earnings
        per share have been calculated on earnings of £100.6m (1999: £98.0m)
        being the profit for the year before exceptional items and goodwill
        amortisation. Adjusted earnings per share have been shown because the
        Directors consider that they give a more meaningful indication of the
        underlying performance.



6.     Exchange Rates


        The profit and loss accounts of overseas operations are translated
        into sterling at average rates of exchange for the year, balance
        sheets are translated at year end rates. The most significant
        currencies are the US Dollar and the Euro - the relative rates of
        exchange were:



           Average Rates                         Balance Sheet Rates
           2000            1999                  2000           1999
           _________________                     _________________
Euro       1.64            1.52                  1.59           1.61
US Dollar  1.52            1.62                  1.49           1.61



The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 December 1999 or 2000 but is derived
from those accounts. Statutory accounts for 1999 have been delivered to the
Registrar of Companies, and those for 2000 will be delivered following the
Company's Annual General Meeting. The auditor has reported on those accounts,
its reports were unqualified and did not contain a statement under section 237
(2) or (3) of the Companies Act 1985.

The Company's 2000 Annual Report and Accounts including the notice of the
forthcoming Annual General Meeting will be posted to shareholders on 9 April
2001.



                                   - ends -

Enquiries to:
Martin Lamb     -   Chief Executive             -   Tel: 020 7329 0096
Trevor Slack    -   Finance Director            -   Tel: 020 7329 0096
Gerard Whelan   -   Corporate Communications    -   Tel: 020 7329 0096

Press release available on the Internet at www.imi.plc.uk

Issued by:
Ben Padovan   -   Weber Shandwick Worldwide    -   Tel: 020 7329 0096